Correlation Between Advanced Ceramic and Chien Kuo

Can any of the company-specific risk be diversified away by investing in both Advanced Ceramic and Chien Kuo at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Advanced Ceramic and Chien Kuo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Ceramic X and Chien Kuo Construction, you can compare the effects of market volatilities on Advanced Ceramic and Chien Kuo and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Advanced Ceramic with a short position of Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Ceramic and Chien Kuo.

Diversification Opportunities for Advanced Ceramic and Chien Kuo

-0.26

Correlation Coefficient

Advanced Ceramic  Chien Kuo

Very good diversification

The 3 months correlation between Advanced and Chien is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction and Advanced Ceramic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Advanced Ceramic X are associated (or correlated) with Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and Chien Kuo go up and down completely randomly.

Pair Corralation between Advanced Ceramic and Chien Kuo

Assuming the 90 days trading horizon Advanced Ceramic X is expected to generate 1.55 times more return on investment than Chien Kuo. However, Advanced Ceramic is 1.55 times more volatile than Chien Kuo Construction. It trades about -0.02 of its potential returns per unit of risk. Chien Kuo Construction is currently generating about -0.03 per unit of risk. If you would invest  17,250  in Advanced Ceramic X on December 2, 2024 and sell it today you would lose (550.00) from holding Advanced Ceramic X or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Advanced Ceramic X  vs.  Chien Kuo Construction

Advanced Ceramic X

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Ceramic X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Ceramic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chien Kuo Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chien Kuo Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chien Kuo is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Advanced Ceramic and Chien Kuo

The main advantage of trading using opposite Advanced Ceramic and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Ceramic position performs unexpectedly, Chien Kuo can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Chien Kuo will offset losses from the drop in Chien Kuo's long position.

The idea behind Advanced Ceramic X and Chien Kuo Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.